Sex, drugs, and bitcoin: How much illegal activity Is financed through cryptocurrencies?

Sean Foley; Jonathan R Karlsen; Talis Putnins

doi:10.1093/rfs/hhz015

Sex, drugs, and bitcoin: How much illegal activity Is financed through cryptocurrencies?

Sean Foley, Jonathan R Karlsen, Talis Putnins

Research output: Contribution to journal › Article › peer-review

Abstract

Cryptocurrencies are among the largest unregulated markets in the world. We find that approximately one-quarter of bitcoin users are involved in illegal activity. We estimate that around $76 billion of illegal activity per year involves bitcoin (46% of bitcoin transactions), which is close to the scale of the US and European markets for illegal drugs. The illegal share of bitcoin activity declines with mainstream interest in bitcoin and with the emergence of more opaque cryptocurrencies. The techniques developed in this paper have applications in cryptocurrency surveillance. Our findings suggest that cryptocurrencies are transforming the black markets by enabling “black e-commerce.”

Original language	English
Pages (from-to)	1798-1853
Journal	The Review of Financial Studies
Volume	32
Issue number	5
Early online date	4 Apr 2019
DOIs	https://doi.org/10.1093/rfs/hhz015
Publication status	Published - May 2019

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FoleyEtalRFS2019SexDrugsAndBitcoin
This is a pre-copyedited, author-produced version of an article accepted for publication in Review of Financial Studies following peer review. The version of record Sean Foley, Jonathan R Karlsen, Tālis J Putniņš, Sex, Drugs, and Bitcoin: How Much Illegal Activity Is Financed through Cryptocurrencies?, The Review of Financial Studies, Volume 32, Issue 5, May 2019, Pages 1798–1853, https://doi.org/10.1093/rfs/hhz015 is available online at: https://academic.oup.com/rfs/article/32/5/1798/5427781
Accepted author manuscript, 1.18 MB

Cite this

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title = "Sex, drugs, and bitcoin: How much illegal activity Is financed through cryptocurrencies?",

abstract = "Cryptocurrencies are among the largest unregulated markets in the world. We find that approximately one-quarter of bitcoin users are involved in illegal activity. We estimate that around $76 billion of illegal activity per year involves bitcoin (46% of bitcoin transactions), which is close to the scale of the US and European markets for illegal drugs. The illegal share of bitcoin activity declines with mainstream interest in bitcoin and with the emergence of more opaque cryptocurrencies. The techniques developed in this paper have applications in cryptocurrency surveillance. Our findings suggest that cryptocurrencies are transforming the black markets by enabling “black e-commerce.”",

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Sex, drugs, and bitcoin: How much illegal activity Is financed through cryptocurrencies?

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